example from tagglable hobo plugin (hobo 1.0.x)

controller.rb

  autocomplete :new_tag_name do
    post = find_instance
    items = Tag.find(:all,:conditions => ['name LIKE ?',"%#{params[:query]}%"]).select { |i| i.viewable_by?(current_user) }
    items = items - post.tags
    render :text => "<ul>\n" +
      items.map { |i| "<li>#{i.name}</li>\n" }.join +
      "</ul>"
  end

tag form example.rhtml

<def tag="tag-list">
  <% target = this %> 
  <h3 param="tag-heading">Tags</h3>
  <div param="collection-wrap">
    <collection:taggings part="tags">
      <a:tag /><delete-button label="x" />
    </collection>
  </div>
  <form with="&this.taggings.new" update="tags" reset-form refocus-form param>
    <div>
      <label for="tagging[tag]" param>Add a tag:</label>
      <name-one:tag complete-target="&target" completer="new_tag_name" />
    </div>
  </form>
</def>